Refer to the Data Provided in Table 17 -Refer to Table 17

question 68

Multiple Choice

Refer to the data provided in Table 17.4 below to answer the following question(s) . The table shows the relationship between income and utility for Celeste.
Table 17.4
$$\begin{array} { | c | c | } \hline { \text { Income } } & \text { Total Utility } \\\hline \$ 0 & 0 \\\hline \$ 40,000 & 50 \\\hline \$ 80,000 & 90 \\\hline \$ 120,000 & 120 \\\hline \$ 160,000 & 140 \\\hline\end{array}$$
-Refer to Table 17.4. Suppose Celeste has a 1/3 chance of becoming disabled in any given year. If she does become disabled, she will earn $0. If Celeste does not become disabled, she will earn her usual salary of $120,000. Celeste has the opportunity to purchase disability insurance for $40,000 which will pay her her full salary in the event she becomes disabled. Celeste's utility with the policy is

• A) 90 and her expected utility without the policy is 80.
• B) 90 and her expected utility without the policy is 90.
• C) 120 and her expected utility without the policy is 80.
• D) 40 and her expected utility without the policy is 90.

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